IMF lauds BSP for tight real estate monitoring

MANILA, Philippines - The International Monetary Fund (IMF) said the enhanced monitoring of the real estate sector by the Bangko Sentral ng Pilipinas (BSP) has helped the Philippines survive external shocks.

Chikahisa Sumi, head of the IMF mission to the Philippines, said the introduction of the residential real estate price index (RREPI) has helped strengthen systemic risk monitoring in the financial sector.

“The BSP’s micro and macro prudential policies as well as enhanced monitoring of real estate and credit conditions including the introduction of RREPI have helped maintain financial stability in a challenging global financial environment,” Sumi said.

The results of the first RREPI released last June showed the country’s property sector remained vibrant in the first quarter but there are no signs of an asset bubble in the real estate industry.

The RREPI increased 9.2 percent in the first quarter from 5.1 percent in the fourth quarter of last year. The RREPI in the National Capital Region (NCR) went up to 9.7 percent from 6.3 percent, while that of areas outside NCR (AONCR) increased to 9.4 percent from 5.9 percent.

“This represents a vibrant housing industry in the Philippines and the robustness of this conclusion is confirmed by the trends in consumer prices as well as the recent result of the Consumer Expectation Survey,” BSP Deputy Governor Diwa Guinigundo earlier said.

For the first RREPI, 93 banks consisting of 40 universal and commercial banks as well as 53 thrift banks submitted their reports to the BSP in the first quarter.

Last November, the BSP required all universal and commercial banks as well as thrift banks to submit quarterly reports on residential real estate loans granted to help detect macro-prudential risks stemming from the real estate market.

The RREPI would help the central bank in addressing concerns of a “bubble” in the country’s booming residential real estate sector brought about by the improving purchasing power of Filipinos.

The BSP stepped up its watch over the real estate sector as early as 2012 by ordering banks to disclose more comprehensive reports on their exposures to property industry.

In June 2014, the BSP introduced stricter rules on banks’ real estate exposure to ensure that lenders have enough capital to absorb any potential losses.

The pre-emptive macroprudential policy measure approved by the Monetary Board required stress tests for banks to determine if their capital will be enough to absorb credit risk that may arise from their exposure to the property sector.

Sumi also lauded the concerted efforts of regulatory authorities to maintain financial stability through the Financial Stability Coordination Council (FSCC), including addressing data and regulatory gaps related to real estate developers and concentration risks posed by conglomerate structures and rising corporate leverage.